AUD/USD edges higher as ceasefire hopes lift risk appetite ahead of deadline
- Australian S&P Global Composite PMI slipped to 46.6 in March, signaling a deepening contraction in private sector activity.
- Pakistan proposed a two-week ceasefire ahead of Trump's 8 pm ET deadline for Iran to reopen the Strait of Hormuz.
AUD/USD rose around 0.4% on Tuesday, recovering from early session lows near 0.6900 to trade close to 0.6950. The pair pushed briefly toward the 0.6980 area during the session, its highest level in over a week, as ceasefire optimism fueled a broad improvement in risk sentiment. The move erased the prior session's modest decline and pushed price back above a key moving average on the daily chart.
On the Australian Dollar side, the S&P Global Composite Purchasing Managers Index (PMI) for March fell to 46.6 from 47, while the Services PMI slipped to 46.3 from 46.6, pointing to a further contraction in private sector output. Separately, the TD-MI Inflation Gauge jumped 1.3% MoM in March after a 0.2% decline in February, with the annual rate rising to 4.3% from 3.6%. The elevated inflation reading reinforces expectations that the Reserve Bank of Australia (RBA) may need to hike again at the May meeting, with markets now pricing in a potential move toward 4.35% or higher. ANZ Job Advertisements fell 3.1% in March, a soft signal for the labor market that may temper hawkish expectations slightly.
On the US Dollar side, February Durable Goods Orders fell 1.4%, missing the consensus forecast of a 0.5% decline, though the ex-transportation reading came in stronger at 0.8%. The ADP Employment Change four-week average rose to 26K from 10K. Federal Reserve (Fed) speakers were mixed on Tuesday, with Governor Williams delivering a neutral score and Governor Goolsbee leaning hawkish. Markets remain focused on Wednesday's 8 pm ET deadline set by President Trump for Iran to agree to a deal and reopen the Strait of Hormuz. Pakistan's Prime Minister has proposed a two-week ceasefire window, and a response from the White House is expected.
An agreement, or even a credible extension of the deadline, could further weigh on crude oil prices and ease inflationary pressures globally, benefiting risk-sensitive currencies like the Australian Dollar. The Federal Open Market Committee (FOMC) Minutes are also due Wednesday, alongside speeches from Fed officials Daly and Waller.
AUD/USD 15-minute chart
Technical Analysis
In the 15-minute chart, AUD/USD trades at 0.6976. The near-term bias is mildly bullish as price holds above the rising 200-period exponential moving average near 0.6927, confirming an intraday uptrend structure after a steady sequence of higher closes. Stochastic RSI remains anchored in elevated territory, signalling persistent upside momentum rather than a completed overbought reversal, which supports the view that dips are likely to attract buyers while the pair remains above its intraday trend base.
Initial support emerges at 0.6955, guarding a deeper pullback toward 0.6935 and the 0.6927 area where the 200-period EMA reinforces a stronger support zone. On the topside, immediate resistance is seen at 0.6980, with a break exposing the 0.7000 psychological barrier as the next upside objective. As long as price action holds above 0.6935, the path of least resistance favors continuation toward 0.7000 rather than a sustained reversal lower.
(The technical analysis of this story was written with the help of an AI tool.)
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
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